On 26th January 2020, the German Investment Funds Association (BVI) published a position paper on review of the Alternative Investment Fund Managers Directive (AIFMD).
Functioning of the AIFMD regulatory framework, scope and authorisation requirements
Both the UCITS Directive and the AIFMD fully cover the activities of asset managers and provide strict and appropriate rules on their authorisation, own funds requirements, operation conditions, organisational and transparency requirements, delegation of functions and reporting obligations to competent authorities.
However, BVI suggest some amendments to improve the effectiveness of the AIFMD in avoiding divergent approaches used by national legislation or existing market practices such as leverage, the availability of liquidity management tools, reporting and investor protection. BVI also highlight that managing investment funds differs fundamentally from business models of banks or other types of financial entities such as insurance companies.
Investor protection
The AIFMD sets a high level of investor protection for professional investors. However, BVI repeat calls for reducing information or using the option to waive the information which an AIFM should provide to professional investors. In that context, BVI advocate for the introduction of a new type of an AIF, the so called low-leverage AIF, that should be eligible for professional and a new type of semi-professional investors on the basis of a distribution passport. BVI do not consider an EU passport for the distribution of retail AIFs to be necessary. BVI also see no need for a depositary passport.
Liquidity management tools (LMTs)
LMTs should be made available in all jurisdictions. Open-ended funds have at their disposal different tools for dealing with liquidity shortages, including the possibility to suspend redemptions. The wide variety of liquidity management tools across jurisdictions such as exit charges, gates, limited redemption restrictions, dilution levies, side letters which limit redemption rights or notice periods will help to reduce liquidity mismatches in open-ended funds and increase the likelihood that redemptions can be met even under stressed market conditions.
Miscellaneous (competence of ESMA and single rule book)
Here, BVI stand by their previous position that ESMA should not be given additional powers for direct product supervision of EU funds. If at all, BVI could envisage a role for ESMA as a gateway for third-country providers and products or as the hub for the “European Single Access Point” proposed by the Commission in its new Capital Markets Union Action Plan. Furthermore, the coexistence of the UCITS and AIFM Directives, in addition to further pieces of EU legislation like EuVECA and EuSEF Regulations, has proven to be successful. BVI advise against an overhaul of the proven and tested regulatory framework for investment funds without any evidence of material shortcomings.
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